Econometrica: Nov 1972, Volume 40, Issue 6

The Multi-Period Control Problem Under Uncertainty<1043:TMCPUU>2.0.CO;2-7
p. 1043-1058

Edward C. Prescott

The multi-period control problem analyzed assumes the data are generated by the simple regression model with an unknown slope coefficient. There is a tradeoff between stabilization and experimentation to learn more about the unknown coefficient. When parameter uncertainty is large, experimentation becomes an important consideration.

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